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Defaulters beware! You can be `Cibilled' !

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Now, banks have option to check defaulters

N.S. Vageesh

Chennai, Oct. 2

About 15-20 per cent of loan applicants hide something of their background, according to experienced bank managers.

The information concealed could be about a loan taken earlier for a house, a car or for buying consumer durables.

Sometimes it could be about their credit card borrowings - that border on the excessive. Sometimes it could be mis-information - inflating the salary earned in order to become eligible for bigger loans.

In each case, the lender is at risk, since the borrower may just not have the repayment capacity.

One more high-risk borrower might have just got away and landed the bank in a mess at a later date. But that may soon come to a stop.

For banks now have the option of first checking if the loan applicant has been a defaulter earlier by querying a database of all loan borrowers in the country compiled by the Credit Information Bureau of India (CIBIL). This has in fact become the norm in many banks.

For instance, State Bank of India's loan approval procedures mandate that a loan applicant's name must first be passed through the CIBIL database to see if there has been a default earlier.

If there has been a default, or if there are borrowings that have not been disclosed in the loan application, it is certain that the application would be rejected.

The search process, however, is a rather complex one - further compounded by an Indian peculiarity - the way people call themselves varies across the country. In some States, the surname is used in the first place, while it comes in second place in many others. In Andhra Pradesh, names are usually preceded by a couple of initials representing the place, family and then the person's name.

CIBIL now receives more than a million queries a month from various banks, according to its Chairman, Mr S. Santhanakrishnan. He says that CIBIL has amassed over 61 million individual consumer records and about 9 lakh commercial records. He expects the individual records to touch 100 million by this fiscal-end.

While bank officers are happy with the availability of a facility to run a check, they say that the level of updation still needs to improve. Many banks do not share the latest data. So a background check can sometimes throw up data only till December 2005.

If a borrower has been shopping around during the past few months that may not show up in the search.

Asked about this, Mr Santhanakrishnan said that a few banks have shared data on a quarterly basis. He is, however, confident that once they fall in line and share information on a monthly basis along with other banks, the problems would get sorted out automatically.

Related Stories:
PSB chiefs may get more loan sanctioning powers
Defaulters beware, banks might bar you!

(This article was published in the Business Line print edition dated October 3, 2006)
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